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Tuesday, 3 July 2007

Islamic Finance: from Islamic Bond to "James Bond's car" deal

"Investment Dar gains international recognition for its iconic Aston Martin acquisition"

Kuwait's The Investment Dar (TID) has received international recognition for its lead in the landmark GBP479m acquisition of the Aston Martin Car Company in the UK. This came at the inaugural Islamic Finance Awards at the London Sukuk Summit which was held at the Royal Horse Guards Hotel in Whitehall on 20 June 2007. INVESTMENT DAR received 'The Most Innovative Islamic Financing Transaction' Award for the Aston Martin acquisition. Five other Awards were also given including one for 'Outstanding Contribution to the Development of an Islamic Capital Market' to Dr Zeti Akhtar Aziz, Governor of Bank Negara Malaysia, the central bank, for her role in establishing Malaysia as the most developed Islamic capital market in the world; and one for 'Outstanding Contribution to the Development of Islamic Finance in the UK' to Lord George of St Tudy, the former Governor of the Bank of England. It was the then Eddie George during his two terms at the Bank of England between 1993-2002, who set up the Islamic Finance Advisory Group that facilitated the introduction of Islamic mortgage products in the UK after the removal of the double stamp duty for such products. The Awards, held in association with KPMG, the global accounting, auditing and consultancy firm, were given during a packed Gala Dinner sponsored by the Dubai International Financial Exchange (DIFX) and in the presence of its CEO, Per Larsson. The Awards recognized the outstanding contribution of players and stakeholders in the global Islamic capital and finance markets. Neil Thomas, Chairman of the Global Debt Advisory Group at KPMG, handed the Award to Mr. Amr Abou El Seoud, Executive Vice President of INVESTMENT DAR, who accepted on behalf of the Kuwaiti Islamic investment company. Aston Martin is of course the glamorous state-of-the-art mode of transport preferred by celluloid British secret agent, James Bond, codenamed 007, and millions of young men around the world. INVESTMENT DAR Chairman and Managing Director, Adnan A Al-Musallam, one of the pioneers of Islamic finance in Kuwait, welcomed the recognition of INVESTMENT DAR on the international stage, stressing that the Award reflected the 'ground-breaking work INVESTMENT DAR has achieved in introducing the first convertible and Musharaka Sukuk to the market, and this landmark Aston Martin transaction, which is the first of its kind used to finance the acquisition of a major asset in the UK.' The good news is that Aston Martin is a debt-free company, continued Mr Al-Musallam. 'This makes our life easier as Islamic investors. It would be easy to Islamise the financial structure of the company, especially future financing needs. Everyone knows that this is a top of the line company and an attractive investment. If you look at the present management, they have really done a very good job. Aston Martin Car Company used to sell 800 units back in 2000. Last year, the company sold over 7,000 units. The total value of this transaction is just under UK£500m, of which 60 per cent is financed through equity contributions and the rest (about GBP225m) through a Murabaha facility, arranged by the London branch of WestLB,' he explained. Indeed, according to David Testa, Head of International Institutions at WestLB, the Aston Martin deal could involve a further long-term Musharaka (equity participation) structure as the company seeks to expand into new export markets in China, the Gulf Cooperation Council (GCC) Countries, India and Russia. The acquisition from Ford Motor Company was completed in mid-June 2007 whereby INVESTMENT DAR acquired 50 per cent of the equity of Aston Martin; Kuwait's Adeem Investment some 27.78 per cent; and two high profile individuals, Mr. David Richards and Mr. John Sinders. Ford Motor Company retains a 12.5 per cent stake in Aston Martin. The Investment Dar Company (TID) is one of the fastest growing investment companies in the GCC and MENA focusing on banking and finance, real estate, services, manufacturing, logistics, corporate and consumer finance businesses. 'The year 2006 has been one of the best years, if not the best, for The Investment Dar,' explained Chairman Adnan A Al-Musallam. 'One of my dreams for the company has been to achieve an equity base of US$1bn. We reached that towards the end of 2006. Similarly the balance sheet assets alone totaled KD1bn at end 2006. Our profitability in 2006 was KD92m (about US$300m). As a result, we had a 10 per cent Return on Assets (ROA); 140 per cent Return on Capital (ROC); and a 30 per cent Return on Equity (ROE). This performance has also put us on a stronger platform to face the various challenges in 2007.' Mr. Al-Musallam welcomes the UK Treasury's initiatives on equal tax treatment for Sukuk, Diminishing Musharaka home financing and Takaful (Islamic insurance) products which were announced in then Chancellor of Exchequer Gordon Brown's 2007 Budget speech. 'I appreciate and salute the UK Treasury for taken this step. INVESTMENT DAR, being one of the most innovative players in this, would like to help in this direction. The UK is a highly regulated, sophisticated and respected financial and regulatory market. A UK debut sovereign Sukuk issuance will encourage other markets to follow suit. It will help in the development of an Islamic capital market and in the secondary trading of such issuances. The world needs the City of London because of its financial expertise and history.' - (AME Info, 1 July 07)

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